A shopper at Patagonia.com who’s considering a pair of board shorts may or may not be in the market for other apparel or accessories to go with the shorts. Patagonia, however, doesn’t take any chances. It prominently presents in a box other products, such as three trendy shirts, that its automated product recommendations system concludes may be a good cross-sell, based on what that shopper and other Patagonia shoppers have viewed and purchased.

The merchant started using the system two years ago and while it declines to reveal exact figures it says personalized product recommendations have more than paid for themselves. And they have boosted the conversion rate.

“Using product recommendations is what a direct marketer wants to do—eliminate the noise and speak directly to the customer,” says Kevin Churchill, director of merchandising at Patagonia. “The online landscape has changed quite a bit, and if you are selling products on the web you need to have that edge and talk to your customer. Not only will it help your sales, it will provide better customer service and give them what they want and what they are interested in.”

An increasing number of e-retailers are using personalization techniques and tools to create a more relevant shopping experience for consumers. 32.6% of e-retailers in the 2010 edition of the Internet Retailer Top 500 Guide used personalization on their e-commerce sites. That figure jumped to 50% in the 2011 edition of the guide.

Personalization can help merchants better merchandise all the products they offer in a way that targets consumers based on a variety of factors, including, among other things, what an individual shopper previously purchased or what all of a retailer’s shoppers viewed the most. 61% of retailers said personalization is among the most important merchandising tactics in web retailing, according to the 10th Annual E-tailing Group Merchant Survey, which canvassed 200 retailers of various sizes and selling in a wide array of product categories.

“Personalization is critical, essential, and growing in importance because as merchants really want to grow conversion, giving the customer a targeted experience through personalization is more effective,” says Lauren Freedman, president of The E-tailing Group Inc. “It is a relevance issue—the more relevant the product, the higher the conversion.”

And some experts say personalization is a must based in large part on how well online retailers know their customers.

“You have so much data on customers, it would be foolish not to take advantage of it—it’s a lost opportunity if you don’t take advantage of personalization,” says Sucharita Mulpuru, vice president and principal analyst at Forrester Research Inc. “Product recommendations increase average order values, they increase time on site, they help expose consumers to products they might not have found otherwise. If you look at the most classic examples, Amazon.com and Netflix, it is about exposing a deep catalog of products and content that people might find useful.”

And Forrester Research has found that the majority of consumers like when an e-retailer recommends products. In a recent survey of 636 online adults who purchased a recommended product, 62% found product recommendations useful, 32% were neutral and only 6% gave recommendations a thumb’s down.

Product recommendations today are the primary personalization tool. They help a retailer reach out to consumers through the pages of its e-commerce site to provide an experience that speaks to those consumers and draws them in. Merchants place them in key locations throughout a site: the product details page, the home page, a category page, the search results page, the shopping cart page and the order confirmation page. Some merchants place them in e-mail marketing pieces, and a handful even include them in online display ads.

Patagonia places recommendations on the product details, checkout and search results pages. Many executives in e-commerce associate recommendations with product and checkout pages, but not search results. Patagonia made the decision to intertwine search results and recommendations based on web analytics.

“We have a higher conversion rate when customers use site search,” Churchill says, “so it made sense to put recommendations on a page where we have a lot of traffic.”

Experts say placement is indeed key, and that there are best practices for personalizing an e-commerce site. Forrester Research suggests putting recommendations above the fold on a web site so consumers need not have to scroll down to see these effective sales tools. It also advises that the wording explain how recommendations work.

“Instead of ‘We recommend,’ try to expose the algorithm; for example, ‘Other people like you bought’ or ‘Other people who have viewed this product purchased,’” Mulpuru says. “Show why you recommended it. If it’s a highly ranked product or a lot of people have clicked on it, use that data to encourage people to click on it.”

Selecting the right number of products to recommend in a given space also is a best practice, says Nikki Baird, managing partner at Retail Systems Research LLC. But she says she knows of no “magic number,” and that testing can determine what is best for a retailer.

But there are risks that come with personalization. If the focus of personalization becomes too sharp, a merchant may be missing out on other selling opportunities, experts say.

“Personalization is an understanding built over time,” Baird says. “You have to be careful because just because somebody is exhibiting a certain behavior doesn’t mean that is their preference all the time.”

She suggests including a page as Amazon.com does where customers can refine their product preferences, such as by marking products that were gifts for others. That way the recommendation system does not take those products into account and keep presenting a man women’s blouses because he once bought one for his wife. Including a checkbox near recommendations that reads, for example, “I like what is being recommended,” can help refine results, she says.

In addition to product recommendations, there are other forms of personalization retailers build and vendors sell. But none are as tried and true as recommendations, experts say.

For instance, some retailers use a customer’s site behavior data to tailor the web site presentation to different types of shoppers. If John visits books and DVDs most of the time, the site will slowly start altering how it builds his pages, on the fly, so that books and DVDs are stressed on each page. This can lead to a happy customer—and very rundown e-commerce staff.

“It is a lot easier to provide product recommendations for personalization,” Forrester’s Mulpuru says, “because most sites have huge catalogs of products and it is easier to pick a product and show them that, rather than try to create all this fancy page content which is a lot of effort for not much reward that is not scalable. Product recommendations continue to be predominant because they are scalable, useful and effective.”

One-third of the Top 500 retailers used recommendations last year, one half do this year. That number likely will continue to increase because so many retailers are finding that personalization works. Merchants without recommendations are potentially ceding an edge to competitors personalizing e-commerce.

Product Recommendations

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Select up to 3 Companies to Compare

Personalization / Product Recommendations

4-Tell

Stevenson, WA.

4-Tell sells an integrated product suite of automated personalized recommendations that work across the web, e-mail, mobile, customer relationship management and in-store channels. The company’s Boost Recommendations Engine features self-optimizing algorithms and a retailer-controlled dashboard, so its recommendations become increasingly ... Read More

4-Tell sells an integrated product suite of automated personalized recommendations that work across the web, e-mail, mobile, customer relationship management and in-store channels. The company’s Boost Recommendations Engine features self-optimizing algorithms and a retailer-controlled dashboard, so its recommendations become increasingly personalized with each click a shopper makes.

Barilliance

Tel Aviv, Israel.

Barilliance provides personalized recommendations, e-mail personalization, behavioral targeting, social commerce and other services. To integrate the company’s Software-as-a-Service technology, a retailer adds a single snippet of code to its e-commerce site. Barilliance says it delivers more than 20 types of ... Read More

Barilliance provides personalized recommendations, e-mail personalization, behavioral targeting, social commerce and other services. To integrate the company’s Software-as-a-Service technology, a retailer adds a single snippet of code to its e-commerce site. Barilliance says it delivers more than 20 types of personalized product recommendations across different page types.

SaleCycle Inc.

Herndon, VA.

SaleCycle is a provider of on-site remarketing and email marketing services that help online retailers reconnect with consumers who abandon their shopping cart, and booking or application forms. SaleCycle’s on-site remarketing application displays a targeted message to ensure the customer ... Read More

SaleCycle is a provider of on-site remarketing and email marketing services that help online retailers reconnect with consumers who abandon their shopping cart, and booking or application forms. SaleCycle’s on-site remarketing application displays a targeted message to ensure the customer completed the purchase before leaving the site and targets customers at the point of abandonment at the moment they leave the site. Messages can be customized based on a customer’s previous behavior or the retailer’s brand and marketing focus. The email remarketing application is designed to recover lost sales by sending emails to customers who abandon a purchase. Retailers can customize the messages with dynamic content, product recommendations and other content.

7 Billion People Inc.

Austin, TX.

7 Billion People Inc., a provider of web personalization software, in March 2009 released WebLegend, a software application that enables online retailers to adapt web pages in real-time to match customers’ individual preferences and unique personalities. WebLegend determines the behavioral ... Read More

7 Billion People Inc., a provider of web personalization software, in March 2009 released WebLegend, a software application that enables online retailers to adapt web pages in real-time to match customers’ individual preferences and unique personalities. WebLegend determines the behavioral preferences of web site visitors by analyzing their clickstreams and building a “portrait” for every customer. The software uses behavioral psychology to analyze the portraits and determine individual shoppers’ goals, decision-making methods, buying behaviors and communications preferences. WebLegend then can start to modify content to better suit that customer’s buying and information presentation preferences.

Aggregate Knowledge

San Mateo, CA.

Media intelligence software developer Aggregate Knowledge in January 2013 acquired Quantivo, a marketing analytics provider. “Quantivo has proven itself across key verticals, including retail, communications, manufacturing, and finance,” says Aggregate Knowledge CEO David Jakubowski. In February 2013, the company announced ... Read More

Media intelligence software developer Aggregate Knowledge in January 2013 acquired Quantivo, a marketing analytics provider. “Quantivo has proven itself across key verticals, including retail, communications, manufacturing, and finance,” says Aggregate Knowledge CEO David Jakubowski. In February 2013, the company announced $11.4 million in new funding from an undisclosed group of investors.

Autonomy Corp. plc

Autonomy Optimost’s Adaptive Targeting application mines all major types of customer attributes to create customer segments, including context (how the visitor arrives at the web site, e.g., search keyword), geography, time of day, and demographic, behavior and account profile information. ... Read More

Autonomy Optimost’s Adaptive Targeting application mines all major types of customer attributes to create customer segments, including context (how the visitor arrives at the web site, e.g., search keyword), geography, time of day, and demographic, behavior and account profile information. Once customer segments are created, multivariate tests are conducted on an unlimited number of copy ideas, offers, and layouts to determine the best application for each audience segment. Adaptive Targeting is powered by Autonomy’s Meaning Based Marketing Engine. Optimost Adaptive Targeting includes unique keyword clustering capabilities that automatically identify concepts and patterns as they are emerging on the web.

Bazaarvoice Inc.

Austin, TX.

In November 2012, Bazaarvoice, which provides customer reviews and other content for online merchants, named chief financial officer Stephen Collins as CEO and acquired Longboard Media, which serves up ads on business-to-consumer e-commerce sites. Earlier in 2012, Bazaarvoice purchased its ... Read More

In November 2012, Bazaarvoice, which provides customer reviews and other content for online merchants, named chief financial officer Stephen Collins as CEO and acquired Longboard Media, which serves up ads on business-to-consumer e-commerce sites. Earlier in 2012, Bazaarvoice purchased its leading rival, PowerReviews. The Justice Department sued to stop the merger and the case went to trial in fall 2013. There was no ruling at press time.

Celebros is a provider of site search, merchandising and conversion technologies for online retailers. Its ConversionPro V8 features concept-based semantic site search, guided navigation, auto complete, multi-select navigation, personalized dynamic merchandising engine, virtual categories, cross-sell, product finder and LiveSight analytics. The analytics package includes a “smart” feature based on live customer action that shows what customers are searching for, the amount of clicks from a search term to a product, click-through rates, and if the products have a sudden decrease in popularity, what terms customers were searching for that resulted in a fallback. The package also includes tools to enable the merchant to act on live customer usage in real time.

ChoiceBot Inc.

San Francisco, CA.

ChoiceBot provides web-based software designed to enable shoppers to search for and evaluate any product. ChoiceBot’s search algorithm ranks products by users’ top overall preferences. The Small Retailer Edition is a hosted, self-managed product for small retailers. The Data Feed ... Read More

ChoiceBot provides web-based software designed to enable shoppers to search for and evaluate any product. ChoiceBot’s search algorithm ranks products by users’ top overall preferences. The Small Retailer Edition is a hosted, self-managed product for small retailers. The Data Feed Edition is hosted technology for e-retailers with larger or frequently updated inventories. Product datasets, available on a paid subscription basis, contain product attribute data for popular product categories.

ChoiceStream Inc.

Boston, MA.

ChoiceStream, a provider of online personalization technology and services, in May 2013 announced the promotion of Eric Bosco, formerly chief operating offer, to the position of CEO. The company says the move is part of its preparation to accelerate sales ... Read More

ChoiceStream, a provider of online personalization technology and services, in May 2013 announced the promotion of Eric Bosco, formerly chief operating offer, to the position of CEO. The company says the move is part of its preparation to accelerate sales growth in 2013 and beyond. Former CEO and founder Steve Johnson remains chairman and continues to work with major clients, ChoiceStream says.

HookLogic

New York, NY.

HookLogic enables retailers to earn revenue from ads placed on their e-commerce sites and advertisers to target marketing based on a shopper’s on-site activity. In September 2013, HookLogic announced a $14.3 million funding round led by Intel Capital, the investment ... Read More

HookLogic enables retailers to earn revenue from ads placed on their e-commerce sites and advertisers to target marketing based on a shopper’s on-site activity. In September 2013, HookLogic announced a $14.3 million funding round led by Intel Capital, the investment arm of electronics manufacturer Intel Corp. It says the funds will go toward increasing sales, enhancing technology and hiring staff.

iGoDigital

Indianapolis, IN.

IGoDigital, an ExactTarget company, helps retailers offer product recommendations based on consumers’ online shopping behavior as recorded by software cookies. It also provides “guided online selling,” such as site search results that list products an online shopper is likely to ... Read More

IGoDigital, an ExactTarget company, helps retailers offer product recommendations based on consumers’ online shopping behavior as recorded by software cookies. It also provides “guided online selling,” such as site search results that list products an online shopper is likely to buy based on known interests. ExactTarget, an e-mail marketing technology firm, acquired iGoDigital in November 2012.

Company Facts

Year Established

2004

Product / Services

Product recommendations/e-mail recommendations/selling tools

Entry Level / Typical Pricing

Activity based pricing model, average $2,500/tool/mo. or flat fee model

Inte Q

Oakbrook Terrace, IL.

SHC Direct, a loyalty and database marketing company, in June 2013 changed its name to Inte Q, which it says better reflects its scope of analytic, strategic and delivery services. In conjunction, the company launched a new web site, InteQInsights.com, ... Read More

SHC Direct, a loyalty and database marketing company, in June 2013 changed its name to Inte Q, which it says better reflects its scope of analytic, strategic and delivery services. In conjunction, the company launched a new web site, InteQInsights.com, and introduced technology that enables retailers to fund gift and loyalty reward cards at the time of use instead of when they are issued.

InterSight Technologies Inc.

Birmingham, MI.

InterSight Technologies analyzes and manages direct communications and data between a company and its customers. The company’s proprietary technology, iMatter--Customer Personalization & Analytic Communicator—tracks and analyzes customer attitude and behavior. It uses customer channels of communication to gain information and ... Read More

Loomia Inc.

San Francisco, CA.

Loomia Inc., a provider of recommendation and personalization products, in January 2009 released the Targeted Content Discovery product and Video Discovery product. They are the latest versions of Loomia's proprietary recommendation engine that blends behavioral, social and contextual data. The ... Read More

Loomia Inc., a provider of recommendation and personalization products, in January 2009 released the Targeted Content Discovery product and Video Discovery product. They are the latest versions of Loomia's proprietary recommendation engine that blends behavioral, social and contextual data. The two products make recommendations via “People Who Read This Also Read” and “People Who Watched This Also Watched” modules. The Video Discovery product drives visitors from articles and blogs to video content, and then offers more recommendations within the video player experience. Loomia offers a recommendations network allowing the site to make recommendations based on users’ preference data from multiple sites.

RichRelevance

San Francisco, CA.

RichRelevance offers a personalized product recommendation application. Recommendations are based on the shopper’s unique attributes and shopping behaviors, such as past purchases and browsing history. The company’s services are available on retailer’s e-commerce sites, mobile apps and e-mail campaigns. In ... Read More

RichRelevance offers a personalized product recommendation application. Recommendations are based on the shopper’s unique attributes and shopping behaviors, such as past purchases and browsing history. The company’s services are available on retailer’s e-commerce sites, mobile apps and e-mail campaigns. In January 2011, the company launched RecLab, an open-source project that enables clients to test personalization algorithms in a live shopping environment.

Sitebrand Inc.

Sitebrand Inc. in March 2009 launched its segmentation and content partner program, Sitebrand Connect, and a software-as-a-service upgrade of its online personalization platform, Segment Serve. Sitebrand teamed up with vdoLife, its content partner, to integrate online video spokesperson streaming content ... Read More

Sitebrand Inc. in March 2009 launched its segmentation and content partner program, Sitebrand Connect, and a software-as-a-service upgrade of its online personalization platform, Segment Serve. Sitebrand teamed up with vdoLife, its content partner, to integrate online video spokesperson streaming content into Segment Serve's delivery mechanism. Sitebrand also introduced One-Click Segments, which simplifies the task of dividing traffic into segments so that retailers can concentrate marketing resources on the best prospects. The Sitebrand Connect and One-Click applications give marketers more Web 2.0 tools to provide users with a richer experience while providing more dynamically targeted content.

SteelHouse

Los Angeles, CA.

SteelHouse is a provider of real-time marketing and behavioral commerce technology to web retailers and others. The company gives online retailers the ability to deliver offers to their shoppers in real time, acting immediately on its intelligence anywhere on the ... Read More

SteelHouse is a provider of real-time marketing and behavioral commerce technology to web retailers and others. The company gives online retailers the ability to deliver offers to their shoppers in real time, acting immediately on its intelligence anywhere on the web and through any device. SteelHouse’s Behavioral Commerce technology powers the company’s real-time offers and retargeting products. Offers are generated based on consumers’ distinct shopping personalities and buying behaviors.

Strands Recommender

San Francisco, CA.

Strands Recommender helps small to mid-sized online retailers increase customer retention and conversion rates through personalized product recommendations. The company is an independent business unit of Strands Labs Inc The company has integrated its services into Demandware’s e-commerce platform. It ... Read More

Strands Recommender helps small to mid-sized online retailers increase customer retention and conversion rates through personalized product recommendations. The company is an independent business unit of Strands Labs Inc The company has integrated its services into Demandware’s e-commerce platform. It also partners with Miva Merchant, Magento, Yahoo Small Business platforms, as well as Responsys, ExactTarget and Bronto e-mail marketing services and SLI Systems site search.

Veruta

Redwood City, CA.

Veruta, a subsidiary of MyBuys, is a retargeting services provider that delivers online advertisements to customers who have visited and left a web site, helping drive them back to the site to make a purchase. Veruta enables merchants to create ... Read More

Veruta, a subsidiary of MyBuys, is a retargeting services provider that delivers online advertisements to customers who have visited and left a web site, helping drive them back to the site to make a purchase. Veruta enables merchants to create differentiated targeted and relevant advertisements. Retailers are charged on a cost-per-engagement basis, or as each prospect clicks on an ad. Retailers can upload their own template designs or have Veruta design them on the merchants’ behalf.

ViralNinjas

San Francisco, CA.

ViralNinjas’ customer acquisition platform enables users to refer a product or brand to friends and family through e-mail, short link or social media. The company offers viral strategy, sharing and Internet Protocol hosting, continuous A/B testing, daily optimization and real-time ... Read More

ViralNinjas’ customer acquisition platform enables users to refer a product or brand to friends and family through e-mail, short link or social media. The company offers viral strategy, sharing and Internet Protocol hosting, continuous A/B testing, daily optimization and real-time reporting. Retailers can outsource services to ViralNinjas or use the platform directly via an application programming interface.

Znode Inc.

Columbus, OH.

Znode, a wholly owned subsidiary of Hibu, in May 2013 released Multifront 7.0, the latest version of its .NET e-commerce platform. The company says updates include dynamic site search via the integration of Lucene search technology, an improved administrative and ... Read More

Znode, a wholly owned subsidiary of Hibu, in May 2013 released Multifront 7.0, the latest version of its .NET e-commerce platform. The company says updates include dynamic site search via the integration of Lucene search technology, an improved administrative and console user interface, an integration toolkit with Scribe, and a reconstructed application programming interface layer.